It’s official. The first draft of the Renters Reform Bill published on 17 May 2023 contained wording to abolish Section 21.
Assuming this passes into law, what is it likely to mean for both private landlords and renters?
Removing a landlord’s flexibility to terminate tenancy agreements with two months’ notice, without needing to give a reason (it doesn’t mean there isn’t one), will cause a profound upheaval in the private rented sector.
Yes, it will (eventually) give renters more security. However, it will concentrate the minds of landlords as to whether they want to sell up. It will also change the way landlords operate in the future. This change may have well negative unintended consequences for renters.
In this blog post, I look at the likely implications of abolishing Section 21 for landlords and renters. I also set out the probable timelines for implementation of the Renters Reform Bill, including latest news on the earliest that Section 21 is likely to be abolished.
Last updated: 19 May 2023
Abolishing Section 21 at a glance
What does the Renters Reform Bill say about abolishing Section 21?
It’s actually quite easy to miss the abolition of Section 21 in the Renters Reform Bill. A word search for “21” comes up blank.
However, s2(a) Renters Reform Bill removes Section 21 from the Housing Act 1988 as part of abolishing Assured Shorthold Tenancies, and deleting Chapter 2, Part I of the 1988 Act, including Section 21 along with it.
This means that once the Bill is implemented, the only way landlords will be able to terminate tenancy agreements, is by using the revised Section 8 Grounds for Possession.
New Section 8 Grounds for Possession
Instead of Section 21, landlords will only be able to use the existing Section 8 framework. There are a number of proposed changes to Section 8 in the Bill, but these are the key new Grounds for Possession:
New Mandatory Ground: Repeated serious arrears
- A landlord would be able to serve a Section 8 notice if the tenant has been in at least two months’ rent arrears three times for at least one day within the previous three years. It would still apply if the renters are no longer in arrears at the hearing.
- The draft specifically excludes arrears due to delays from the payment of Universal Credit.
- Landlords wouldn’t be able to use this new ground to evict renters if the arrears stay under two months’ rent.
Revised Mandatory Ground: Landlord or close family member moving in
- Landlords will be able to serve two months’ notice to sell or move close family members into the property. However, they wouldn’t be able to do this in the first six months of a tenancy.
- The landlord must intend it to be their (or their family member’s) only or principal home. The landlord’s family includes their spouse/partner, and their respective parents, grandparents, siblings, and grandchildren. It doesn’t include nieces, nephews etc.
New Mandatory Ground: Sale of property
- A landlord can only this ground if the tenancy has lasted more than 6 months.
- Landlord must intend to sell the property.
Revised Discretionary Ground: Anti-social Behaviour
- The Anti-social Behaviour Action Plan published by the government on 27 March 2023 gave cause for optimism that Ground 14 will be amended to make it easier for landlords to evict tenants for behaviour that falls short of criminal anti-social behaviour.
- In the end, the new wording was a damp squib. The proposal is to change the wording from guilty of “behaviour causing or likely to cause nuisance or annoyance” to “capable of causing“.
- I’m not sure there’s much a significant difference between the two, even if the guidance claims this will make ASB easier to demonstrate. In any event, it’s a discretionary ground, so a judge will decide.
Landlords will also be able to use the existing Section 8 Grounds for Possession.
For tables showing what the Section 8 Grounds for Possession will look like after the Renters Reform Bill comes into force, click here: Making sense of the new Section 8 Grounds for Possession.
When will Section 21 Notices be abolished?
Now the Renters Reform Bill is going through parliament, we can take some educated guesses about the likely timetable for scrapping the ability of landlords to use Section 21 notices.
If we assume that the Renters Reform Bill passes into law during this 2022-23 parliamentary session, what is the timeline for abolishing Section 21?
The answer lies in the White Paper, A Fairer Private Rented Sector. The White Paper promises to “allow time for a smooth transition to the new system”, and it mentions two key dates:
- First implementation date (at least six months after Royal Assent). The new rules would apply to new tenancies, which will all be automatically periodic.
- Second implementation date (at least 12 months after the first). All existing tenancies would transition to the new system. At this point, Section 21 would cease to apply to all renters on this date, whether or not their tenancy is already in place.
The Bill retains these two different dates, referring to a “commencement date” and an “extended application date”.
If the government keeps to this timetable and the Bill passes into law in the autumn of 2023, the earliest Section 21 will be abolished is the spring of 2025.
However, this estimate depends on the Renters Reform Bill passing through parliament and receiving Royal Assent during this parliament, which is due to end in November 2023.
Given the complexity of the Bill, and the long summer recess from 21 July to 3 September, it’s more likely that the Bill pass into the next parliamentary session, delaying Royal Assent until 2024. This would probably push back the abolition of Section 21 Notices until 2026.
Likely short-term consequences of abolishing s21
Research by the NRLA published in February 2023 found that 30% of landlords planned to reduce the size of their portfolio in 2023.
Now it’s clear that Section 21 will be scrapped, the remaining landlords are faced with a number of choices:
Sell up or stay?
- An increase in landlords selling is likely to lead to more evictions in the short term. Why? Landlords usually receive more money if they sell with vacant possession. It’s also easier to sell without renters, for instance arranging viewings and redecorating the property for sale.
- It will become more difficult to sell a rental property after the abolition of Section 21. Consequently, the approaching end of Section 21 is likely to concentrate the minds of any wavering landlords. This could have the opposite effect of the end of a temporary reduction in stamp duty, which leads to a surge of property purchases.
Dealing with “problem renters”
- Landlords often use Section 21 to evict “problem” renters. They might be regularly late with rent, but not two months behind. Or their behaviour may fall short of “serious” anti-social behaviour. For instance, they might not be looking after the property well, or they’re in breach of the tenancy agreement. The landlords might be able to use Section 8 grounds, but choose Section 21 because it’s quicker and easier.
- However, Section 21 has allowed landlords to give renters the benefit of the doubt, knowing they can terminate if it doesn’t work out.
- That said, as it would become more difficult to evict tenants, landlords are likely to try to lower risk in the interim period, by being less willing to give renters the benefit of the doubt.
- This may lead to an increase in evictions in the run up to spring 2025 as landlords will want to reduce risk before the rules change.
Likely long-term consequences of abolishing s21
Although abolishing Section 21 will give renters more security, it’s likely to change the way that landlords select renters. Landlords are likely to become more risk adverse when choosing tenants.
Without the safety net of Section 21, and having to rely on the Section 8 grounds of possession, landlords will be reluctant to take risks on affordability. Renters on low incomes and zero-hours contracts may find it increasingly difficult to rent without a guarantor. Anyone without a squeaky clean credit history may find it hard to find somewhere to rent.
Unless there is more social housing, increased prudence on the part of landlords, and an increase in landlords selling up, all promise to increase the shortage of private rental properties.
Final thoughts
The Renters’ Reform Bill will profoundly change the relationship between landlord and renter in England. By and large, giving renters more security is good for wider society, and it’s something I personally support.
However, although the reforms are unlikely to make a difference in practice where the relationship is already positive, and the landlord gets a fair return for their investment, ending Section 21 will make all landlords more cautious when choosing renters.
Finally, it’s important to remember that the changes to the EPC rules are currently due to come into effect for new tenancies in 2025. (Although there has been an unsatisfactory radio silence on this since the Minimum Energy Performance of Buildings (No. 2) Bill (MEES) stalled in May 2022). Unless the government amends or delays the MEES Bill, it’s likely to coincide with the implementation Renters’ Reform Bill.
Landlords with properties with a EPC D or E, low cash flow due to interest rate increases, and high tax because of Section 24, may well decide to call it a day before the end of Section 21 in spring 2025 makes it difficult to sell.
I will keep this blog post updated.
You may also find useful
The 10 Key Changes in the Renters Reform Bill
How to terminate a tenancy under Section 8
Landlord essentials: What landlords need for buy to lets
Is passive income a myth for landlords?
How to terminate a tenancy under Section 21
How to be a pet friendly landlord
Landlord guide to increasing rent
